John Howie, chef and owner of four restaurants, says it’s not uncommon under… more

Photo: Marcus R. Donner

“It’s going to allow me to serve new products to my guests,” Howie said. “Also, as a mid-size restaurant owner, to negotiate some of our own pricing.”

The I-1183’s potential impact on restaurateurs like Howie has been somewhat lost in the fierce, TV-fueled debate over the more obvious retail revolution the initiative’s passage would unleash — closing state liquor stores and putting liquor bottles on supermarket shelves.

But Howie’s strong views on I-1183 are far from unique in the restaurant industry. The Washington Restaurant Association favors the initiative, too. Many of its members say they feel hamstrung by the current system, under which the state is the sole supplier of spirits. The state sets the price and dictates the terms.

“Almost every restaurant I know is for the initiative,” said Chad Mackay, who owns El Gaucho restaurants in Seattle and Tacoma, and Aqua by El Gaucho (formerly Waterfront Seafood Grill) at Seattle’s Pier 70.

Voters will decide in the Nov. 8 election. This is the second straight year such an initiative will be on the ballot.

Like I-1100 before it, 1183 is sponsored and largely bankrolled by Costco Wholesale, which this time has kicked more than $6.6 million into the campaign. Supporters also include Trader Joe’s and Safeway.

Opponents include spirits, wine and beer distributors and unions representing workers at the state liquor stores. The Washington Food Industry Association, a trade group representing independent grocers, also opposes I-1183, maintaining that it is written to benefit the biggest retailers and that smaller ones may not be able to compete.

Some small restaurant owners may have similar concerns, but few have spoken out about them.

Alex Fryer, spokesman for the No on I-1183 campaign, said small restaurants are bound to lose if I-1183 passes.

“If you’re smaller,” he said, “I think you’re going to have a hard time with private distributors in the game.”

If 1183 passes, the state Liquor Control Board would be required to close all state liquor stores by June 1, the same date that retail selling by license holders would commence. Private distribution would be allowed starting in March.

Supporters of I-1183 contend that it successfully addresses problems with last year’s ballot measure, mainly by increasing penalties for selling alcohol to minors and requiring stores that sell liquor to be at least 10,000 square feet in size, which keeps hard liquor out of mini-marts and gas stations. Some small stores would be allowed to sell liquor in areas deemed underserved.

A hot and heavy TV ad campaign waged by both sides has focused on issues such as safety and underage drinking. Less emphasized are the state revenue implications.

The Office of Financial Management estimates that dismantling the state liquor store system and privatizing distribution and sales would result in a gain of $216 million to $258 million for the state general fund and an increase of $186 million to $227 million in total local revenues over six fiscal years, “after Liquor Control Board one-time and ongoing expenses.”

The Washington Research Council also predicts revenue increases. It estimates that over six years, I-1183 would boost revenue to local governments by $279 million. For the state, the estimated six-year gain would be $164 million.

Revenues would come from license fees and a 17 percent tax on gross retail sales.

I-1183 mostly concerns distributors and retail outlets. Restaurants are mentioned only twice in the lengthy text, both times in relation to wine. The initiative says it would “update the current law on wine distribution to allow wine distributions and wineries to give volumes discounts on the wholesale price of wine to retail stores and restaurants; and allow retailers and restaurants to distribute wine to their own stores from a central warehouse.”

The state restaurant association says owners of eateries would pay no new fees or taxes if the initiative passes.

For Mackay, who was an outspoken supporter of I-1100, this new initiative is about letting competition set prices and improve service by wholesalers and distributors.

“Do I think I’m going to get better pricing (if I-1183 passes)? Yes, I do,” Mackay said. “Even if I don’t, I’m going to get better service and selection, and the customers are going to benefit.”

Under the proposed system, restaurateurs could buy spirits, wine and beer directly from distributors, retailers or even the producers — whoever offers the best price and service.

“The state has no business in supplying restaurants,” Mackay said. “They’re a poor distribution center and a poor supplier. And the liquor board determines what’s going to be available. Anything else is a special order. It’s an antiquated model. All I’m asking is that we have a competitive supply chain. I want a reliable supplier and I want to be able to change if I’m not satisfied.”

Howie has similar concerns. He owns Seastar restaurants in Bellevue and Seattle, Sport in Seattle and John Howie Steak in Bellevue.

“For us, it’s about the freedom to have what we want in our bars for our guests,” Howie said. “I’m totally comfortable with (the state) taxing us. … I’m against them having a profit margin and how they run their operation. There are a lot of rules and regulations, things other states have relinquished.”

Washington charges license holders the same price per bottle, regardless of whether they buy one or a hundred. The state charges a 51.9 percent markup to retail customers, compared to a 39 percent markup for eateries and other license holders.

While it seems likely that large restaurant owners could negotiate better deals based on volume, how a privatized system would affect smaller owners remains to be seen.

“Under 1183, competition in the marketplace will determine the price,” said Bruce Beckett, the Washington Restaurant Association’s director of government affairs. “We certainly think there will be downward pressure from the current markup, but no one knows where that’s really going to end up.”

Howie points out that some smaller restaurants already join forces to buy food as a way to negotiate better prices.

“I’m sure that kind of co-op would form for this,” he said.

If any restaurateurs oppose 1183, they aren’t eager to speak out. None have publicly opposed the initiative. Several contacted for this story declined to comment either way. One owner raised the question of whether the new system would put smaller restaurants at a disadvantage, but didn’t want his name used.

Beckett of the state restaurant association suggests that restaurant owners generally are too busy to be politically active. Mackay says some might be afraid of antagonizing the liquor board.

Fryer, of the No on I-1183 campaign, agreed. He said small restaurant owners may be reluctant to speak out for the same reason some independent grocers are: “Why should I antagonize anyone?”

Small restaurants, Fryer said, now get what amounts to a 15 percent discount compared to what retail customers pay.

“That goes away,” he said.” In the post-1183 world, if you buy maybe six bottles a week, finding a distributor that will give you that same deal will be impossible.”

As for larger restaurant owners, Fryer said none of them are large enough to get the same kind of discounts from suppliers that the state could.

“There’s just no way,” he said.

“This (current system) is government protecting certain people’s profitability,” Mackay said. “The power structure doesn’t want this to change. The rest of us do.”